Renovations are under way at a condo in Oakland where the buyer is setting up a new household.

Photo: Rashad Sisemore, The Chronicle

Renovations are under way at a condo in Oakland where the buyer is...

Image 2 of 5

Karen Rogers checks the height of her lights after Bao, a hired construction worker, adjusted the fixtures. Rogers, 25, used to live with five people in Berkeley, but saved enough to buy her own condo.

Photo: Rashad Sisemore, The Chronicle

Karen Rogers checks the height of her lights after Bao, a hired...

Image 3 of 5

Glass light fixtures wait to be unpacked at the new household Rogers is setting up in Oakland.

Photo: Rashad Sisemore, The Chronicle

Glass light fixtures wait to be unpacked at the new household...

Image 4 of 5

Karen Rogers continues to work on unpacking boxes and furniture while her condo is being renovated. Karen Rogers, 25, used to live in a big group house in Berkeley for the first couple of years after college but now has saved enough money to buy her own condo in Oakland. According to the Census Bureau, as the economy is recovering people are beginning to feel confident to commit to having their own place.

Photo: Rashad Sisemore, The Chronicle

Karen Rogers continues to work on unpacking boxes and furniture...

Image 5 of 5

Karen Rogers moves boxes in her condo during renovations while Bao, a hired construction worker from BK-Home Services, adjusts light fixtures. Karen Rogers, 25, used to live in a big group house in Berkeley for the first couple of years after college but now has saved enough money to buy her own condo in Oakland. According to the Census Bureau, as the economy is recovering, people are beginning to feel confident to commit to having their own place.

Photo: Rashad Sisemore, The Chronicle

Karen Rogers moves boxes in her condo during renovations while Bao,...

After graduating from UC Berkeley two years ago, Karen Rogers lived in a six-person group house in Berkeley while she stashed away cash to get her own place.

"I figured if I waited a while, I would be able to save more money and the housing market would become more affordable," she said.

Now Rogers, 25, is in the midst of unpacking and supervising some kitchen renovations on a one-bedroom condo she recently bought in Oakland's Adams Point neighborhood.

Rogers exemplifies what economists call "household formation" - an economic indicator that in recent months has shown the country climbing out of its recession doldrums.

When times are tough, people double up their living situations to save money. Boomerang kids return home after college; twentysomethings share with roommates; couples postpone tying the knot or starting a family; foreclosed-upon families move in with relatives. But when the economy is doing well, household formation rises, as people get the income - and the confidence - to commit to renting or buying their own place.

That's happening now, according to the Census Bureau. Americans formed 1.15 million new households during the 12 months ended in September - a big jump from the annual average of 650,000 new households added during the prior four years. The current rate is still a bit shy of the typical average of 1.25 million household formations a year.

"It's a signal that confidence is coming back," said Robert Denk, senior economist with the National Association of Home Builders. "People are getting more secure in what they think the future will be. Young people are moving out of their parents' homes or giving up their college roommates to set up their own houses."

Saving and investing

Rogers, who runs a nonprofit called Sprouts Cooking Club that enlists chefs to give children hands-on lessons in cooking nutritional foods, said she has worked constantly since high school, all the while saving and investing.

"I saved so much money by being in group housing," she said.

By getting her own place in her mid-20s, Rogers is in the vanguard of her generation, research shows.

"Young adults in the U.S. and California are taking much longer to form their own households than previous cohorts of young people," said Hans Johnson, a demographer with the Public Policy Institute of California. "They've had to contend with the recession, a difficult labor market and high amounts of college-loan debt."

In the Bay Area, the rise in household formation is reflected in the tight housing market, Johnson said. As anyone who's recently sought an apartment to rent or a house to buy is well aware, demand outpaces supply in much of the region.

Low vacancy rates

"The San Francisco metropolitan area (the counties of San Francisco, San Mateo, Marin, Alameda and Contra Costa) has among the lowest vacancy rates in the country," Johnson said. "Census shows a rental vacancy rate of 2.5 percent in the third quarter of 2012, the third lowest of any metro area."

By contrast, the national rental vacancy rate is 8.6 percent.

The homeowner vacancy rate - houses that are empty while on the market or for some other reason - is likewise tight. The San Francisco metro area had 0.5 percent vacant homeowner units in the third quarter, census data show, compared with 1.9 percent nationwide.

"Home prices are rebounding faster in the Bay Area than in the rest of California and the U.S.," Johnson said. "Demand is strong here even with relatively higher prices."

Housing is also tight throughout the state. The Census Bureau shows that California's rental vacancy rate declined between 2011 and 2012 and is now sixth lowest of any state, while its homeowner vacancy rate is the fifth lowest.

Could this presage a housing shortage?

"I don't want to jump the gun, but certainly in the (core) Bay Area it's pretty clear we see evidence of shortages," Johnson said.

Besides being an indicator of a strengthening economy, household formation fuels continued economic growth. Moody's Analytics pegs the impact of each new household formed as $145,000, with a ripple effect on everything from furniture stores to contractors.

The impact is especially pronounced in the real estate and construction sector.

"This is a shot in the arm in demand for housing," Denk said.

As demand for new homes plummeted, more than 2.1 million construction workers nationwide lost their jobs from 2007 to 2011, according to the Bureau of Labor Statistics. With household formation on the rise, more of them may get back to work.

Builders are cautious

"Housing starts are slowly but surely ramping up," Denk said. "But builders are being cautious. They don't want to get too far ahead of what we see in demand."

It's not just young people who are boosting household creation. "We have many people higher up the age distribution who suffered setbacks" during the downturn, Denk said. "As they get back on their feet, they will form new households."

Kate Hellenga, 46, lived in an eight-person group house in San Francisco over the past few years, both to save money and because she likes co-habiting with "like-minded people."

But as she found new employment, and realized it was just too many roommates, she decided this year to move out to a rental with only one roommate.

'Money to spare'

"I'm doing better (financially) than I've ever done," said Hellenga, a psychologist who works four days a week for San Francisco's Foster Care Mental Health Program and one day a week doing clinical supervision at San Francisco State. "My income grew for the better; my savings balance was steadily increasing so I had money to spare, which was new."

Her new roommate is also a psychologist, "with a dog who even looks like mine," and they rented a house in the Bayview in October. As a bonus, the rent turned out to be slightly less than she was paying in the group house.

"It's going great," she said. "The dogs bonding was a big part. They really like each other."